Mike Wilson, the chief U.S. equity strategist at Morgan Stanley, has adopted a more bullish stance on the stock market, setting a year-end 2025 target for the S&P 500 at 6,500, implying an 11% potential upside from current levels. This shift in outlook is noteworthy, as Wilson has been notably bearish in recent years, accurately predicting the 2022 bear market but maintaining a cautious view even as the stock market rebounded after October 2022.
Previously, Wilson had set a mid-2025 target of 5,400 for the S&P 500, with the index hovering around 5,900 on Monday. However, he now sees the combination of potential Federal Reserve interest rate cuts, improving economic growth, and the possibility of deregulation under President-elect Donald Trump’s administration as strong catalysts for the stock market.
“A potential rise in corporate confidence after the election, similar to the post-2016 election period, could trigger a more balanced earnings profile across the market in 2025,” Wilson said in a note to clients.
While Wilson had earlier expressed concerns about stock market valuations, citing them as elevated, he now believes that they could be justified if the economy remains stable. He pointed out that the S&P 500’s median stock multiple is relatively moderate at 19.0x, suggesting that valuations aren’t yet at extremes and could stay supported if earnings growth broadens out as expected in 2025.
Wilson advised investors to focus on high-quality cyclical stocks, particularly in the financials sector, which he believes stand to benefit from a favorable macroeconomic backdrop. On the other hand, he recommended taking an underweight position in consumer discretionary and consumer staples stocks, citing concerns over limited pricing power and the potential impact of tariffs.
Despite his more positive outlook, Wilson urged investors to “stay nimble,” given the ongoing market leadership shifts and the uncertainty surrounding Trump’s policies on immigration, global trade, and government spending. “We are potentially entering a period of significant policy changes that could have both short- and long-term implications for markets,” he warned.
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